Trump's trade position potentially 'significant' for NZ

Nov. 10
(BusinessDesk) - US President-elect Donald Trump's stance on
trade in a world where countries are putting up more
barriers could be serious for New Zealand, says Reserve Bank
governor Graeme Wheeler.

The RBNZ reviewed its decision
to cut the official cash rate a quarter-point after Trump's
unexpected win and the Republican Party's victory in the
Senate and House of Representatives overnight, ultimately
deciding to go ahead with the move. Wheeler told
Parliament's finance and expenditure committee that
long-term interest rate markets had a massive swing,
initially falling 13 basis points before ending the day 20
basis points higher, as investors weighed up the prospect of
looser regulation and corporate tax cuts with Trump's
anti-trade rhetoric.

During his campaign, Trump has
floated the introduction of high tariffs on Chinese and
Mexican goods and renegotiating the North American Free
Trade Agreement and Trans-Pacific Partnership at a time when
global trade volumes were rising at their slowest rate since
the early-1980s and G20 countries were adopting
protectionist policies at their fastest pace since 2009,
Wheeler said.

"That's what people need to focus on in the
near-term - what is the US position on trade reform?"
Wheeler said. "That potentially has significant implications
for us. I think the US will need to think very seriously
about its leadership in the Asia-Pacific region and what
role trade and investment flows have in that because TPP was
a vehicle for delivering a lot of that leadership."

In
September, Prime Minister John Key noted the growing tide of
protectionism around the world and said his biggest concern
was that failure to ratify TPP could open the gates for even
tighter regimes.

The TPP trade and investment pact
between New Zealand, the US, Japan, Canada, Mexico, Chile,
Peru, Australia, Malaysia, Vietnam, Singapore, and Brunei
would eclipse that deal, covering 36 percent of the
world’s gross domestic product and 40 percent of New
Zealand’s exports. However, its far-ranging provisions on
policy formation and investor-state dispute mechanisms have
been criticised as undermining nations' sovereignty.

The
New Zealand government has a goal of lifting exports to 40
percent of gross domestic product and were sitting in the
March at about 31 percent of the country's GDP, up from
about 28 percent in 2008, the year before the current
National-led administration took office.

Law firm Chapman
Tripp expects the government will be assessing how it can
work with the incoming US administration and will probably
be considering other ways to boost trade with the TPP
looking unlikely to be ratified.

"This will have New
Zealand considering Plan B. That includes the Regional
Comprehensive Free Trade Partnership and potential bilateral
deals with India, the European Union and the United
Kingdom," it said in a note. "These are all still some
distance off, especially in the current global environment,
which is no doubt why Trade Minister Todd McLay has spoken
recently instead about New Zealand needing to refocus its
efforts on making the most of existing trade
deals."

ExportNZ said Trump's election signalled a lost
opportunity to reduce trade barriers to local products if
the TPP is knocked back and that New Zealand would also lose
out if the US stops its firms from outsourcing overseas and
introducing tariffs.

"Even though Trump has labelled free
trade agreements and the TPPA as 'horrible' and
'disastrous', it’s unclear as to exactly what his
objections are," executive director Catherine Beard said.
"Also, it remains to be seen how much these statements were
merely political rhetoric."

Bank of New Zealand head of
research Stephen Toplis said the two areas New Zealand
should focus on from the election is what Trump's
anti-globalisation stance will mean for world trade, and
what impact his fiscal policies will have for US inflation,
bond yields, and the US
currency.

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